The Business of Being Green: How Investing in Green Technology Today May Be Critical for Success Tomorrow

Topping Diamond Wipes International's new manufacturing facility in Chino, Calif., is a glittering 3,360 panel solar installation that is already churning out enough power to offset nearly all of its energy needs. On especially sunny days, it can even exceed those needs.

The installation is part of an ongoing environmentally conscious program in which Diamond Wipes, a mid-sized producer of disposable wet wipes, has invested $1.6 million over the last year -- about eight percent of the company's yearly earnings.

In an announcement for the installation, the company calls the investment "a bold leap forward in its green initiative."

The investment really highlights a fundamentally new way of doing business in a green economy, said Tom Hill, senior VP of marketing and sales and Diamond Wipes.

In this new model, consumer demand for green products from environmentally-focused companies is driving manufacturers to invest heavily in new technology with few (if any) immediate financial rewards.

"We feel we are being proactive in responding to a rapidly growing concern in the U.S. driven by the consumer," Hill said. Across the industry, he said that is translating "to more environmentally responsible management" among corporations, no matter the immediate cost.

He points to the solar installation as an example.

"The system we chose to use is an initial investment of about $1.6 million and we will see about 35 to 40 percent of that come back to us over time [through state and federal rebate programs]," he said. "But the bulk of this is on us. Based on projected savings, we're looking at a seven to eight year timeframe for payback."

In other words, Diamond Wipes has invested nearly a tenth of its 2011 earnings for the hope of (maybe) breaking even on energy savings sometime in the next decade.

From this perspective, the movement into solar seems absurd. Why would a company invest this amount of resources for a project with such far off and mild return on investment?

The answer: it's good business.

Good Business

"We are business people," said Hill. "So in making any major investment or in taking any long term initiative, you're looking to do several things. Cost savings over the long haul is certainly part of that. ... but there is also a big long term benefit in PR value, both with the consumer, but also very importantly with our corporate customers."

As primarily a business-to-business company, Diamond Wipes' green model has an appeal all along the supply chain, he said.

"We feel there is a benefit with our corporate customers, since many of them are taking initiatives to project themselves to the customers as being more green, so they like to do business with companies that are projectable as being more green."

Basically, this means that every documented green initiative Diamond Wipes takes -- from solar energy projects to biodegradable packaging -- can be used as a selling point for every customer adopting its products or taking them to market. Because Diamond Wipes is green, every company doing business with them is a little greener.

"Our customers ... are being very proactive in the expectations -- or even demands -- of their suppliers to be able to document their sustainability efforts as it relates to packaging, manufacturing, manufacturing practices, distribution, right on through the whole carbon footprint chain. We want to be proactive in that environment. "

And they certainly have been. Diamond Wipes has a long catalog of environmentally conscious initiatives that cover every step of the manufacturing and distribution process.

This includes a current project to become certified by the Forest Stewardship Council (FSC), which monitors wood products all the way from the forest to the store shelf to guarantee sustainable practices. The company has also transitioned away from hard plastic packing and lids to reduce waste and improve shipping and warehousing efficiency, and switched to biodegradable, compostable products all throughout its portfolio.

Looking forward, this kind of business model will not be seen as simply an extra incentive for a niche customer, Hill said, but will be standard practice for competitive business.

Companies need to "Think carefully, but think quickly" about their green initiative, he said.

"In the long term, I think any company that is not thinking in this direction is probably putting themselves at peril."